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The Value of Risk Adjusted Data for Healthcare Organizations

Apples-to-apples comparison of cost and quality performance

ZeOmega blog series on risk adjustment looks at where we’ve been, what we’re facing today, what’s on the horizon, and how to best prepare. Over the next several blogs, our ZeOmega risk adjustment solution experts will provide a forecast of regulatory changes and guidance on ensuring risk payment accuracy in both business and clinical operations.

The topics we’ll be covering in this series are:

  1. Brief overview and history of the Risk Adjustment (RA) program.
  2. The results of RA policy and how it’s led to gamification of chronic condition coding.
  3. The value of risk-adjusted data across your organization.
  4. How overpayments in risk adjustment threaten the Medicare Trust Fund solvency.
  5. Recent federal actions and the likely next steps to control overpayments.
  6. Strategy and platform pivots required to move forward successfully in risk adjustment.
  7. ZeOmega’s expert tips and how the Jiva Risk Adjustment Navigator meets the evolving RA mandates.

In this third blog, we will discuss how risk-adjusted data allows organizations to compare costs, project revenue, and evaluate network performance equitably to pinpoint exactly where practice behaviors should be adjusted.

Risk Adjustment is one of the three primary revenue streams for most payers, along with the PMPM and any Quality bonus or withholds received for achieving Quality targets.  For providers in arrangements where risk adjustment income is shared, this can be significant as well.

Accurate documentation of risk in a population is critical, as discussed in other blogs in this series.  But having accurate representation of the risk in a population, or subpopulation cohort, can provide benefits beyond the basic reimbursement.

Network Performance Evaluation

For multiple reasons, it’s a requirement to understand risk in a provider’s panel.  The most obvious and common reason is in managing claims experience and Medical Loss Ratio (MLR) – whether from the standpoint of a payer or a risk-bearing provider.  There are multiple reasons for apparent over-utilization of services yet some of them are legitimate.  As payers look to develop high performing networks, the ability to compare “apples to apples” is necessary.  Similarly, for risk-bearing providers, understanding how to refer patients within their own network is not a financially trivial matter.  

Typically, a discussion of claims experience with a provider results in the familiar refrain: “But my patients are sicker!”  This was indeed the response I received as Chief Medical Officer (CMO) at a major payer organization when I compared a gastroenterologist who owned the endoscopy center against his peers.  

The ability to risk-adjust his patients against his colleagues revealed they were no sicker than others in his service area, and a variety of measures were employed to encourage him to pursue more evidence-based care.  I embarked on a similar exercise for cataract surgery as CMO of another payer.  Despite variations in reimbursement of up to 300% for one of my providers, no risk-adjusted substantiation was evident and we were able to re-negotiate the fee schedule.

One of the payers I mentioned above engaged in an enterprise-wide initiative to create high performing networks in our markets.  Risk-adjusted provider report cards for metrics such as overall spend, as well as spend for ER and pharmacy, and readmission rates provided us the necessary foundation on which we could include certain providers in our sculpted network and provide peer comparisons (and peer pressure!) for others to adjust their practice behaviors.  Visits to our provider groups and individual providers included these metrics and peer comparisons, which were initially de-identified but later included provider names.

Fraud, Waste and Abuse Evaluation – Special Investigation Unit

As CMO of a national program integrity organization, we were contracted by one of the largest payers in the country to analyze outpatient coding patterns in a southwestern state for Fraud, Waste and Abuse.  Almost immediately, a pediatrics practice was identified that billed exclusively level 4 and 5 E&M (Evaluation & Management) codes.  Risk adjusting their population revealed they were a referral center for the sickest children in the state and the coding was justified.

At yet another payer where I was CMO, one of my risk-bearing Independent Physician Associations (IPAs) informed me they were restricting referrals in their network based on certain utilization patterns.  This raised concerns regarding network adequacy.  Closer inspection after risk-adjustment revealed their restrictions were well-founded and necessary under their capitation.

Value Based Care Arrangements

Risk bearing provider entities also need to understand risk during both the contracting phase and during their ongoing operations.  The ability to enter Value Based Care arrangements is predicated on understanding the risk of financial exposure on the delegated population and services – for both sides.  Historical claims can tell a large part of the story; understanding the population risk can inform intelligent negotiations and possible carve-outs.  Provider organizations taking financial risk need to recognize they are assuming the same risks as payers caring for their patients.

While I’ve worked with CMOs at my provider organizations who assumed the risk adjustment went to the providers, the fact is that most of my organizations had some variation of risk reimbursement sharing.  For some of these entities the share was well into seven figures.  Monitoring the risk factor optimization can be an extremely mutually beneficial endeavor!

Dual Special Needs Plans

With the rapidly rising popularity of Special Needs Plans, payers need to understand the difference between successfully managing chronic conditions and attracting adverse risk.  The attractive PMPMs of programs such as D-SNP, the ability to take advantage of non-uniformity of benefits with VBIDs, make these lines of business and benefit packages enticing.  The critically-thinking payer executives will work with their actuaries to model the risk and continually risk-adjust their populations to ascertain their true costs of doing business and determine whether a particular line of business or benefit package is the most profitable choice.

As risk adjustment models change, understanding the potential impact to a population and payer revenue projections allows executives to strategize for expected reductions affecting their MLR. For instance, Wakely analysis indicates that the new version 28 risk adjustment model will result in a 6.7% decrease to risk scores for D-SNP populations.

While the uses of risk-adjusting your data are only limited by your imagination, I’ll conclude with one more practical example from a regional provider-owned payer where I was CMO.  I was approached at a meeting of our peer payers by another CMO about putting risk scores in front of her case managers.  Just as we had been doing, she was interested in how her case managers could work with their members, create individualized care plans and see the risk scores.  My care managers knew that if they had a member with, let’s say, five or more chronic conditions and the risk score was less than 1, there was an opportunity to reach out to the primary care provider for attestation.

The visibility and use of risk scores goes far beyond just the RAF submission.  The availability of risk scores from a solution such as Risk Adjustment Navigator, on a “single pane of glass” can be an enormous benefit to your organization.  Risk adjustment can not only maximize and optimize your financial performance across the organization, it can also improve the best-practice quality of care for your population and attract membership, make you more competitive as a payer, help you negotiate value based care as a payer or risk-bearing provider, convince your network they are being treated fairly while encouraging positive peer competition, assure program integrity, and drive high performance as a payer or provider.

Ask us how The Risk Adjustment Navigator can add to the value of Jiva, ZeOmega’s Healthcare Enterprise Management Platform.